MIGA-insured aquaculture business in Zambia brings sustainable investment and solution to overfishing.

2/9/2015

Approved

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Zambian Tilapia Business Proceeds Swimmingly

February 09, 2015 —Zambians love their fish. Dried in cassava leaves or peanut sauce, boiled small fish, or fried tilapia—this staple of Zambians’ diet is an affordable source of protein. It also has been found in abundance in the country’s many lakes and rivers—until recently.

Now the country suffers from severe overfishing and Zambians can no longer get sufficient nutrition from the country’s bodies of freshwater that once teemed with life. This, coupled with an increase in demand for fish brought along by a surging population and higher incomes, has created excess demand that can no longer be met domestically. In fact, the situation is so dire that Zambia now imports 60 percent of its fish. Today, a walk through any of the country’s urban markets will find that most fish on display for sale is frozen and imported from Asia.

The Zambian government and civil society organizations have promoted small-scale aquaculture as a way to increase food security and better rural livelihoods. But this model has not gained traction due to lack of inputs and expertise, as well as the difficult cold-chain logistics involved.

Now, with the efforts of a company called Yalelo, the landscape is quickly changing.

After just two years since breaking ground, the company has employed more than 175 people, begun to farm an annual 7,000 tons of fish, and set new standards for sustainable fisheries in Zambia.

From here, Yalelo Chairman Adam Taylor has much higher aspirations. With 40 percent of all surface-fresh water in sub-Saharan Africa, “Zambia should be the fish-basket of Africa,” he notes. “We don’t want to just get to 100 percent domestic production; Zambia should be a net exporter.”

Taylor is also the Chief Investment Officer of Liongate Venture Partners, an investment firm that specializes in longer-term investment opportunities in Africa. MIGA issued a guarantee of $2.9 million covering Liongate’s equity investment into Yalelo. The coverage is for a period of up to 10 years against the risks of transfer restriction, expropriation, and war and civil disturbance.

Taylor underlines the importance of MIGA’s guarantees for their fundraising efforts: “MIGA’s insurance has played a big role in overcoming hesitations among many investors that we approach.” He continues, “These investors may be less familiar with Africa, but are certainly aware of the risks and are looking for ways to mitigate them.”

Doing Well by Doing Good

The philosophy underpinning Yalelo’s business is very much in line with the principles of impact investment. Tilapia is a native fish species that thrives on a diet of soybeans and maize—both plentiful in Zambia. The fishery on Lake Kariba is in a remote rural area, which means the company brings work to a population desperately in need of jobs. Yalelo has a strong commitment to environmental and social sustainability that includes a comprehensive environmental management plan and adherence to MIGA’s performance standards.

In a context where most workers have no education beyond primary school, Yalelo’s junior staff participate in vocational training on topics such as fish health and nutrition, mechanics, and computers. In addition, the company’s benefits accrue beyond their immediate staff: Yalelo leverages its purchasing power, logistics, and technical expertise to enable community participation in the sector’s growth through an extensive network of fish vendors and planned out-grower partnerships.

The City Ladies

It is four o’clock in the morning and approximately 50 women charge into Yalelo’s warehouse in Lusaka. They’re running at a brisk pace, overturning bins of fish to look for the best to sell to their customers.

These are the “city ladies” and they represent half of Yalelo’s business. Carrying heavy bags of fish—often 20 kilos each—they bring them to the market and to their individual customers who await them on a weekly schedule.

The rest of Yalelo’s supply goes to small and large stores through an efficient system of cold-chain transport. While the company supports its vendors through training and payment extensions, it also sells refrigerators with Yalelo’s branding at a third of the market price—or leases them for free.

Growth and Recognition

After just two years with the operation fully running, the company has already received an award from the Zambian government and the World Bank. Yalelo was voted the best company in Zambia for job creation, competing among 30 selected companies.

And as business booms in Zambia, Yalelo already has an eye to expansion in Kenya and Ghana. The company hopes to bring its technology, systems, and skills—as well as its impact investment model—to other countries where overfishing has become a broad concern.

MIGA-backed loan bridges funding gap to deliver important transport project for the State of São Paulo, Brazil.

11/11/2014

Approved

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Brazil Bridges Infrastructure Gap with
Innovative Funding Solution

November 11, 2014 —With more than 41 million people, São Paulo is Brazil’s most populous state. While its transport network is one of the most developed and modern in Brazil, it is still insufficient for the state’s current and future needs.

The State of São Paulo has sought to address the situation for some time and the World Bank has played an important role through lending and technical assistance. An important component of this work is the São Paulo State Sustainable Transport Project that aims to rehabilitate roads in several key corridors and reconstruct two bridges.

Photo credit: Marcelo Camargo/ABr

Yet, with a total cost estimated at $729 million, this project faced a major financing hurdle. In September 2013, the World Bank approved a $300-million loan toward the initiative. But with growing demand for loans from Brazil’s poorest states, the bank was unable to commit additional funds. The State of São Paulo itself committed $129 million. That left a shortfall of $300 million.

The challenge the project faced was to mobilize the additional $300 million needed to complete the project at an acceptable cost. The World Bank and the State of São Paulo moved quickly to look for a solution.

A successful partnership

“Looking at the investment needs of the project and the constraints of the World Bank’s lending envelope, we knew we had to look at private-sector resources to provide a comprehensive financial solution to the client,” says Miguel Navarro-Martin, Head of Banking Products at the World Bank’s Treasury—which mobilizes financial resources from external sources as an important area of its work.

A partnership with the Bank Group’s Multilateral Investment Guarantee Agency (MIGA) was a natural answer. In addition to political risk insurance, MIGA provides credit enhancement products that protect commercial lenders against non-payment by a sovereign, sub-sovereign, or state-owned enterprise.

In an innovative move, the State of São Paulo bid out the project to commercial banks with a requirement that their loans be backed by MIGA’s credit enhancement instrument. The presence of a MIGA guarantee would reduce the risks to commercial banks, in turn bringing down the financing costs for the State.

“Santander is proud to participate in this project—together with World Bank and MIGA’s support—that will contribute to improving the State of São Paulo's transport and logistics efficiency, safety, and disaster risk management,” says Octaviano Couttolenc Mestre, Global Head of Export & Agency Finance for Banco Santander.

Together, the MIGA-backed Santander loan and the World Bank loan will finance the rehabilitation and upgrading of 650 kilometers of roads and the reconstruction of two bridges for inland waterway transport on the Tiete River. These improvements will reduce logistics costs to benefit local and regional industry. The state also expects the project to increase employment and wages across a wider geographic area.

A win-win situation for all parties

This project allowed MIGA to enter the transaction downstream, avoiding many of the normal costs of doing business. The World Bank’s transport team had already undertaken significant due diligence, safeguards, and monitoring. This created an opportunity for MIGA to lower the premium charged to the private bank—and ultimately paid by the State of São Paulo.

Photo credit: The World Bank

With MIGA’s credit enhancement, the cost of the commercial loan was lower and the tenor longer than São Paulo could have achieved on its own. The additional financing will be used to increase the scope of the project’s activities.

What’s more, the World Bank Group’s involvement allowed Banco Santander to book the risk of the transaction as World Bank/MIGA exposure rather than São Paulo or Brazil exposure. This helped them preserve lines of credit for other operations in Brazil.

“This project showcases MIGA’s new credit enhancement products and the benefits of enhanced World Bank Group cooperation,” says Edith Quintrell, Director of Operations at MIGA.

Deborah L. Wetzel, World Bank Director for Brazil, notes, “São Paulo has continuously innovated to overcome its infrastructure bottlenecks, often becoming a model to other states in Brazil—and the use of MIGA guarantees in this project continues this tradition.”

The World Bank Group’s support for developing countries grew sharply over the past year as the organization focused on delivering results more quickly, increasing its relevance for its clients and partners, and bringing global solutions to local challenges.

In fiscal year 2014, we issued a total of $3.2 billion in guarantees for projects in MIGA’s developing member countries. An additional $1.8 million in guarantees was issued under MIGA-administered trust funds. This year marked the fourth consecutive year of record issuance by MIGA, with 51 percent of this new issuance falling into at least one of MIGA’s priority areas. MIGA continues to be most active in the higher-risk countries and mobilizes substantial additional capacity for clients and governments by partnering with public and private insurance providers. At the end of the year, MIGA’s gross exposure was $12.4 billion.

MIGA’s mission is to support economic growth, reduce poverty, and improve people’s lives. In order to achieve this, the Agency needs a clear understanding of the development outcomes of the projects it supports. MIGA’s Development Effectiveness Indicator System (DEIS) collects a common set of indicators from clients to demonstrate results across all projects: volume of investment catalyzed, direct employment, taxes paid, and value of locally procured goods. It also measures sector-specific indicators. MIGA’s $3.2 billion issuance in fiscal year 2014 is expected to catalyze an additional $2.6 billion in public and private co-investment.